Knife River's Strategic Move to Acquire Strata Corporation

Knife River's Acquisition Strategy Takes Shape

In a significant move for the construction materials industry, Knife River Corporation (NYSE: KNF) has announced its definitive agreement to acquire Strata Corporation, a premier construction materials supplier and contracting services provider operating within North Dakota and northwestern Minnesota. This strategic acquisition is guided by the anticipated growth and scalability that Strata can offer, with a notable purchase price of $454 million reflecting a multiple based on Strata's expected 2025 Adjusted EBITDA, revealing strong investment potential.

Understanding Strata Corporation's Market Position

With its establishment dating back to 1910, Strata Corporation has evolved into a vertically integrated aggregates company that boasts over 75 aggregate locations, extensive reserves, and considerable rail assets, facilitating efficient market delivery of these resources. The company further strengthens its offerings with 28 ready-mix plants and three asphalt plants along with a robust contracting services division that leads in asphalt paving and concrete construction.

Cultural Alignment and Shared Values

Brian Gray, President and CEO of Knife River, expressed profound respect for Strata and its contributions to the industry, stating, "Strata is respected among its peers and in its communities and is well-known for its strong culture and expertise." Knife River looks forward to merging the two companies, celebrating their similar dedication to putting people first and maintaining integrity in operations.

Expected Benefits from the Acquisition

This acquisition aligns with Knife River's “Competitive EDGE” strategy, aiming to achieve profitable growth. Gray emphasized the potential for Strata to significantly enhance Knife River’s Adjusted EBITDA margin within the first year of integration. A solid understanding of service territory in areas known to Knife River provides confidence in the synergies that this acquisition will unlock.

Transition and Integration Plans

Set to close in the coming years, the agreement is anticipated to be finalized in the first half of 2025, pending regulatory approval and standard closing conditions. Knife River plans to finance this acquisition through cash reserves alongside long-term debt issuance, demonstrating a calculated approach in their expansion strategy.

Strata's Historical Growth and Vision

Originally founded as Bradshaw Gravel Supply, Strata has blossomed under the stewardship of majority shareholder James Bradshaw, who guided the company for nearly five decades. Bradshaw highlighted that building a family business comes with unique challenges, particularly when the time comes to transition. He expressed confidence in the cultural fit between Strata and Knife River, ensuring a focus on the future well-being of their team members.

About Knife River Corporation

Knife River Corporation is a crucial player in the construction materials sector, being part of the S&P MidCap 400 index. The company specializes in mining aggregates while also marketing essential construction materials like crushed stone, sand, gravel, and ready-mix concrete. Knife River operates on various industrial, residential, and commercial projects, focusing on delivering quality and value through vertically integrated contracting services. For additional insights regarding Knife River's offerings and capabilities, visit www.kniferiver.com.

Frequently Asked Questions

What is Knife River's recent acquisition?

Knife River Corporation has entered a definitive agreement to acquire Strata Corporation, enhancing its capabilities in the construction materials sector.

Why is this acquisition significant?

This acquisition allows Knife River to expand its market reach and is expected to be accretive to its Adjusted EBITDA margin within the first year.

When is the acquisition expected to close?

The transaction is anticipated to close in the first half of 2025, subject to regulatory approvals.

What are Strata's primary services?

Strata Corporation specializes in aggregates, with operations including ready-mix concrete, asphalt plants, and contracting services focused on asphalt paving and concrete construction.

How does this fit into Knife River's overall strategy?

This acquisition reflects Knife River's commitment to its Competitive EDGE strategy, aiming for profitable growth through strategic expansions.

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